Reference no: EM132819360

Problem 1: You are conducting the audit of DEF Ltd which operates a large property investment business across Australia. In your discussions with management, you identify that the property market has been booming during the year and rental returns have also increased substantially. Which of the following is true in relation to the audit.

a) The overall audit risk would need to increase due to the improved property valuations causing less risk of impairment.
b) Control risk will increase which will mean that detection risk will need to decrease in the audit.
c) The level of materiality will increase because there is less risk of errors due to a lower inherent risk.
d) A more substantive audit strategy on the property would be required due to a lower detection risk approach required.